Volkswagen struggling to agree fix for US test cheating cars: Reports

The source said the German carmaker would hold further talks with the Californian Air Resources Board this week and with the US Environmental Protection Authority (EPA) next weekReuters | January 06, 2016, 08:44 IST

Volkswagen is struggling to agree with US authorities a fix for vehicles capable of cheating emissions tests, a VW source said on Tuesday, showing how relations between the two sides remain strained four months after the cheating came to light.BERLIN/WASHINGTON: Volkswagen is struggling to agree with US authorities a fix for vehicles capable of cheating emissions tests, a VW source said on Tuesday, showing how relations between the two sides remain strained four months after the cheating came to light.

The source said the German carmaker would hold further talks with the Californian Air Resources Board this week and with the US Environmental Protection Authority (EPA) next week, and still hoped to reach a solution by a mid-January deadline.

But finding a fix was proving more difficult than expected, in part because this involved producing new components which then required testing, said the person, who declined to be named as the talks are confidential.

The difficulties highlight the lack of progress VW has made in winning back the confidence of US regulators and drivers almost four months after it admitted to cheating diesel emissions tests and promised to turn over a new leaf.

On Monday, the US Justice Department said it was suing Europe's biggest carmaker for up to $90 billion for allegedly violating environmental law - five times the initial estimate of regulators.

The move threw VW's US problems back into focus after it seemed to be recovering ground in Europe, sending its shares down more than 8 percent to a six-week low on Tuesday.

"The announcement serves as a reminder/reality check of VW's still unresolved emissions issues," Goldman Sachs analysts said of the lawsuit.

VW Chief Executive Matthias Mueller is expected to meet EPA representatives and politicians in Washington next week after visiting the Detroit Auto Show, the VW source said, on what will be Mueller's first trip to the United States since the scandal broke in September.

VW declined to comment on the progress of talks with the EPA, on whose behalf the US Justice Department filed the lawsuit, or on Mueller's plans.

The lawsuit claim of up to $90 billion is based on fines of as much as $37,500 per vehicle for each of four violations of the law, with illegal devices installed in nearly 600,000 vehicles in the United States, according to the complaint.

US lawsuits are typically settled at a fraction of the theoretical maximum. Goldman has estimated the likely costs at 500 million euros ($534 million).

A senior US Justice Department official said the judge was not expected to rule that every car should be charged for all four counts, but said the department had set the bar high, knowing it would come down.

Another senior departmental official said a settlement would likely be "in the billions", without elaborating. Both officials declined to be named.

PUBLIC HEALTH

VW shares pared losses to trade down 4.4 percent at 120.9 euros by 1530 GMT, still 21 percent lower than before the company's cheating came to light on Sept. 18.

The shares had been recovering after VW announced last month it had agreed simple fixes for 8.5 million affected vehicles in Europe, and sharply lowered the number of cars affected by a separate understatement of carbon dioxide emissions.

The Justice Department said in its complaint it was seeking "appropriate steps" from the German group to make nearly 600,000 vehicles compliant with US emissions rules.

"Car manufacturers that fail to properly certify their cars and that defeat emission control systems breach the public trust, endanger public health and disadvantage competitors," said Assistant Attorney General John C. Cruden for the Justice Department's Environment and Natural Resources Division.

Evercore ISI analyst Arndt Ellinghorst, who recommends buying VW shares, said VW should do its utmost to allay concerns in the United States.

"We would argue that VW should go for the broadest and even most expensive buy back option in order to restore customer and dealer relationships in the US," he wrote.

"The more VW spends on fixing its US problems, the lower its legal charges will be at the end."

German politicians expressed concern on Tuesday that a hefty US fine could hit jobs. VW employs around 270,000 people in Germany.

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